Philexport wants status quo on zero VAT exemption

MANILA, Philippines -  Local exporters are bucking the government’s proposal to lift the zero value added tax (VAT) exemption to indirect exporters, saying such a move will hurt the entire export industry.

The Philippine Exporters Confederation Inc. (Philexport) is petitioning for a status quo on the zero VAT exemption, which currently applies to both indirect and direct exporters, even as the Department of Finance (DOF) proposes to retain the zero rating only for direct exporters.

While it supports the move to reform Philippine tax policies and administration for greater compliance and higher collection, the Philippine Exporters Confederation Inc. (Philexport) said it does not agree with the proposal to remove the zero VAT exemption for indirect exporters as part of the government’s action plan to push for accelerated and inclusive tax reforms.

Indirect exporters supply materials or services to direct exporters.

The Finance Department has proposed to retain the zero rating only for direct exporters.

Taking away the zero VAT rating for indirect exporters would hurt the entire export community, Philexport said in a position paper.

Philexport said this would not solve the leakage brought about by indirect exporters who are reportedly reusing the zero-rated VAT certificates to get as many VAT exemptions.

Instead, Philexport urged the DOF to “set up the Track-and-Trace System to identify legitimate transactions that qualify as zero-rated VAT.”

Under the system, “qualified transactions for zero-rating should be logged in. Each transaction is uniquely identified, goes through an approval process and then cancelled when products are finally exported.”